Stock Analysis & Ideas

General Motors (GM) vs. Ford (F): Iconic Auto Brands Compete for EV Space

Story Highlights

The auto industry, aided by the government’s incentives, is pushing full throttle into the electric vehicle (EV) race. Both Ford and General Motors are investing huge dollars in the EV space to earn a higher share of the burgeoning EV market.

General Motors Company (NYSE:GM) and Ford Motor Company (NYSE:F) are both the oldest and biggest automakers in the U.S. Notably, with the rapidly shifting preferences toward cleaner and greener energy resources, the popularity of electric vehicles (EV) has taken over traditional internal combustion engine (ICE) autos.

Both GM and Ford are also making efforts to launch EVs and gain a larger share of the growing EV market. Ford has plans to invest up to $50 billion in EV manufacturing over the next five to ten years. Ford has pledged to achieve carbon neutrality by 2050 and to have 40% of its auto volume all-electric by 2030. 

Meanwhile, General Motors has vouched to turn all-electric by 2035. Notably, GM plans to invest up to $30 billion into EV manufacturing by 2025, which is expected to launch about 30 EVs globally.

Let us look at both the iconic auto brand’s efforts in the EV industry.

Ford’s August Sales Impress

Ford sold a record 158,088 autos in August, growing 27.3% compared to August 2021, which compares favorably to the overall industry’s muted sales growth of 4.8%. Retail sales contributed to a robust 29.7% jump in August numbers. Remarkably, Ford’s EV sales jumped a humongous 307.3% to 5,897 autos in August.

Ford said that it was the best-selling car in America for the second time in a row. Notably, Ford’s market share increased to 13.4% in August 2022.

“The all-new electric F-150 Lightning had its best month since launch, while sales of our gas engine line up grew 25%, electric vehicles 307%, and hybrids achieved a new August sales record with 7,302 vehicles sold,” said Andrew Frick, VP, Sales, Distribution & Trucks, Ford Blue.

Is Ford Stock a Good Buy for 2022?

Now may not be a good time to buy Ford stock. Ford has had its share of challenges in 2022. Its stock has lost 27.6% so far this year. Even Wall Street analysts prefer to remain on the sidelines.

On TipRanks, F stock has a Hold consensus rating. This is based on four Buys, ten Holds, and one Sell rating during the past three months. The average Ford price forecast of $15.56 implies that the shares are almost fully valued at current levels.

On the contrary, hedge funds are highly optimistic about Ford and have pumped solid dollars into the stock. TipRanks’ Hedge Fund Trading Activity tool shows that confidence in Ford is currently Very Positive, as 16 hedge funds increased their cumulative holdings of F stock by 2.1 million shares in the last quarter.

Moreover, Ford pays a quarterly cash common dividend of $0.15 per share, representing an impressive current yield of 2.97%. This may be one of the reasons to hold on to the stock.

Despite the supply chain snarls and logistics issues, Ford has managed to outperform expectations in five out of the six quarters since 2021.

For the third quarter of Fiscal 2022, the Street expects Ford to post an adjusted profit of $0.52 per share, just one cent higher than its comparative prior year period’s figure. Meanwhile, revenue is pegged at $37.57 billion, representing year-over-year growth of 5.3%.

General Motor’s Push into EV Manufacturing

As per a WSJ report, GM is offering to buy out Buick dealers that do not want to invest fully into selling EVs by 2030. This is the latest effort by GM to push its EV plans and transform its sales network.

Buick has approximately 2,000 franchise dealers in the U.S. that will be given the option of a buyout. However, the terms of the buyout and the amount remain undisclosed.

GM is also investing heavily in Ultium Cells manufacturing plants in three locations, and a fourth is to be announced soon. The plant in Ohio is expected to go live this month, followed by Tennessee and Michigan starting in 2023 and 2024, respectively.  

GM Reinstates Dividend & Share Buyback

GM impressed shareholders by reinstating dividend payments and share repurchases, which were discontinued in April 2020 owing to the pandemic’s disruption. On August 19, GM’s board decided to reinstate the quarterly cash common dividend of $0.09 per share to be paid first on September 15. This represents a current dividend yield of 0.23%. Moreover, the company also raised its share buyback program to $5 billion.

Happy with GM’s progress and turnaround, CFO Paul Jacobson said, “GM’s consistently strong earnings, margins, and cash flow, our investment-grade balance sheet, and the achievement of several significant milestones in our growth strategy enables us to invest aggressively to accelerate our all-electric future while also supporting the return of excess free cash flow to shareholders, aligned with our long-term capital allocation strategy,”

What is the Prediction for GM Stock?

Wall Street analysts remain cautiously optimistic about General Motors. On TipRanks, GM stock has a Moderate Buy consensus rating. This is based on ten Buys, four Holds, and one Sell rating during the past three months. The average General Motors stock prediction of $47.87 implies 19.3% upside potential to current levels. Meanwhile, the stock has lost 34.3% so far this year.

Further, TipRanks’ Hedge Fund Trading Activity tool shows that confidence in General Motors is currently Very Negative, as 26 hedge funds decreased their cumulative holdings of GM stock by a whopping 9 million shares in the last quarter.

On the earnings front, General Motors has consistently beat expectations except in the last quarter. For Q3FY22, the Street expects GM to post adjusted earnings of $1.97 per share, much higher than its comparative prior year period’s figure of $1.52 per share. Meanwhile, revenue is pegged at $41.62 billion, representing a massive year-over-year jump of 55.4% and 16.4% sequential growth.

Ending Thoughts

Both Ford and General Motors are investing huge dollars in the EV landscape, including battery manufacturing and auto electrification. However, considering the analyst ratings and hedge fund inclinations, Ford seems to be the current favorite among the two. General Motors seems to be marginally behind Ford in terms of successfully launching EV models and financial stability. Nonetheless, the EV targets of both companies are years away, and only time will tell which auto giant will emerge as a long-term winner.

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